US SEC Sends Letters to Companies Requesting 'Climate Disclosure'

(Photo by WSJ)

[Asia Economy Reporter Yujin Cho] The U.S. securities authorities have sent letters to various companies requesting disclosure of climate change-related risks. This move aligns with U.S. President Joe Biden's policy direction to hold corporate activities accountable for responding to climate change.

According to the Wall Street Journal (WSJ) on the 22nd (local time), the U.S. Securities and Exchange Commission (SEC) sent letters to dozens of listed companies requiring them to disclose to investors the impact of climate change on their financials and business operations.

The requested disclosures focus on the direct and indirect impacts of climate change-related laws currently pending or already in effect on corporate activities, ranging from the physical effects of natural disasters caused by climate change to business trends in response to climate regulations.

Specifically, this includes the possibility of climate change-related damage compensation lawsuits, the scale of expenditures related to transitioning from fossil fuels to alternative energy, the potential decrease in demand for goods or services that emit greenhouse gases, and risks to business from natural disasters such as severe weather.

In particular, companies are required to quantify and specify the extent of cost increases due to compliance with climate change-related regulations.

The letters were sent to each company's Chief Financial Officer (CFO), requesting that the relevant information be included in the regular reports submitted quarterly to the SEC each year.

WSJ did not disclose which companies received the letters but cited sources familiar with the matter, stating that the letters were sent to companies related to agriculture, oil refining, gas, banking, real estate, and transportation.

Since his inauguration in January this year, President Biden has been making government-wide efforts to address climate change. In line with this policy direction, Gary Gensler, the SEC Chairman appointed by President Biden, has initiated discussions to revise corporate disclosures related to the climate crisis, working on establishing uniform and strengthened standards.

According to WSJ, the revision process is still ongoing, and the content requested from companies this time was based on the climate risk disclosure guidelines introduced in 2010.

President Biden plans to announce the “Global Methane Pledge” at the 26th United Nations Climate Change Conference of the Parties (COP26) to be held in November, aiming to reduce methane gas emissions, another major contributor to global warming after carbon dioxide, by at least 30% compared to last year by 2030.